Q3 2019 Earnings Call
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Good morning, and welcome to treat quarter 2019 earnings conference call for Orchid Island capital. This call is being recorded today October 25 2019.
At this time the company like to remind listeners that statements made during today's conference call relating to matters that are not these particles Sachs I forward looking statement subjected to a safe harbor provisions of the private Securities Litigation Reform Act of 1995.
Listeners are cautioned that such forward looking statements are based on information currently available I think management's good faith.
I believe with respect to future events and are subject to risks and uncertainties that could cause actual performance or results could differ materially from those expressed in such forward looking statement.
Important factors that could cause such differences are describing the company's filings, we did securities and exchange Commission, including the company's most recent annual report on Form 10-K .
The company I show no obligation to update such forward looking statements to reflect actual results changes in assumptions or changes in other factors affecting forward looking statements.
Now I would like to turn the conference over to the company's Chairman and Chief Executive Officer Mr. Robert colleagues for please go ahead.
Thank you operator, and good morning, everyone. I hope everybody has had a chance to download or slide deck or at least view on line is that will be the focus of today's call as always I will start on page three.
Oh, the table of contents just to give you an outline of what will be discussing today and this is the standard format, Oh I'll start off by going over our financial highlights for the quarter ended September Thirtyth 2019, I'll, then review market developments during the quarter and summarize it began to provide.
An overview of our outlook of the market as we see a going forward then of course I'll talk about our financial results portfolio characteristics credit counterparties in hedge positions and at a vital few words about our outlook in capital raising activity turning to slide four or financial highlights for the quarter or could you.
Generated a net loss per share on a GAAP basis, or 14 cents, we incurred 32 cents in losses from net realized and unrealized gains and losses on RMBS and derivative instruments, including net interest income on our interest rate swaps.
Earnings per share were 18 cents, excluding these same realized and unrealized gains and losses, and RMBS and derivative instruments, including net interest income on interest rate swaps.
Book value per share at the end of the quarter was $6.22 a decrease of 41 cents or 6.18% from $6.63 at June Thirtyth.
During the third quarter of 19, the company declared and such we paid 24 cents per share in dividends and since our initial public offering we have declared $10 17, a half sense of dividends per share our economic return for the quarter was negative 17 cents or 2.6%, which reduced the year to date return to 1.5.
As per said 1.9, you annualize.
The company issued 8 million 771301 shares during the quarter the bulk of which were on a follow on offering a 7 million shares in late July and I will speak about that specifically near the end the presentation.
Turning now to slide five.
As always would provide our results versus our peer group. The peer group was listed below in the footnotes. It has changed somewhat over time as.
Firms it'd be the left the space been acquired or new entrants, who fit our are the makeup of our strategy a little closer I have been included in the peer group a we do not have Q3 data is always since we're one of the first companies to report so it's somewhat back when looking at the bottom of the table. We show the first and second quarter result.
<unk> for us in our peer group the first quarter, we trailed the results of our peer group by 1.4% second quarter, we outperformed by 3.4 since our inception in February of 2013 or gets generated return of 12.7% versus our peer average or 4.8 the calculation method.
Oh, geez, describing the notes as well [noise] turning out to market developments.
Slide seven.
We observed in the quarter is really a continuation what's been going on all year as you can see on the left side, where we show the treasury curve the nominal benchmark treasuries on the rightsize the swap curve as you can see the Green line, which was the ended the year down to the Blue line and the Red wine, which is the end of the quarter's a continuation of the.
Conversion of the curve with lower and lower longer term rates and as a result, since we are mortgage backed securities investors. This means that rates available to borrowers are become progressively lower this really doesn't tell the full story all we're showing here, it's kind of the beginning in the ending level of rates throughout the quarter, Mark was extremely volatile and for less.
Third mortgaging bastards dynamically hedged this presented some meaningful challenges.
And that's what we had to deal with now if you look at slide eight slide eight shows you on the left side the changes in these benchmark rates for the quarter and on the Rightside with a two year look back I think the two year look back is somewhat more illustrate of what happens you can see a in either case, whether it's in the treasury.
Tenure treasurer swap over the course of a quarter you had meaningful volatility with the case or the 10 year Treasury note. The rage high to low was 68 basis points, which is quite a bit for any quarter, but the distance travel throughout the quarter was much more as you can see we had a meaningful rally in August in early September .
We sold off and then rallied right back so it's been a very volatile quarter and has again you know as a mortgage investor. This means that the the cash flows of the securities we own the projected cash flows can change meaningfully as you rally mortgages lose the duration that cash flow shorten turnaround in sell off the opposite occurs also hedge ratios change.
And your profile on when you run your shocks can change dramatically as this occurs as a result, as you attempted dynamically hedge it can be quite challenging.
We also realized very fast fees during the quarter, not just orchid, but across the mortgage universe and in particular certain cohort coupons, three and a house and for especially of 2018, and 19, which paid at 50 60, plus CPR, we haven't seen speeds like that and those kind of production coupon since 2003.
And they were big drivers are very poor performance of the sector the asset classes and be a TV I used the quite poorly.
Turning now to slide nine we've had this table for quarters now it just shows you the slope of the curve as represented by the five year note in the 30 year Treasury bond as you can see on the bottom. The Green line. This is the spread in a way back in the 2013 air that was north of 250 basis points and it hit a tropical.
Well over a year ago, approximately 20 basis points as you can see it's only recovered very modestly in fact in the most recent quarter. It actually so declined again, so we're still doing with a very flat curve environment.
Slide 10 talk a little bit about performance of TV days for the quarter in this case, where third showing for 30 year fixed rate coupons. The blue is a 3% coupon.
Then the Red is the three and half and so on.
Two things I want to highlight first the first is the foreign half percent coupon, which has been that was the star for the quarter had modest outperformance versus very low hedge ratio for the 10 year.
The Blue line is the Fannie three coupon.
As we were in the second quarter of the year that was the slight discount coupon and so to the extent we had rallies in the market and people were chasing duration in this in this asset class that would be a coupon of choice.
We've got into August and the market rallied the 3% coupon became progressively higher premium approach to one or two dollar price and perform quite poorly.
And then of course, as I mentioned, three and a house and forced it extremely purely because of speeds. So really it was kind of the tail two stories there foreign assets the upfront coupons the coupon of choice others were shut to that forms is quite fast.
If we look on slide 11, the top left we show these same for coupons in total price change over the quarter. As you can see threes were up 25, Ticcs Board a house were actually up 27, and the two bellied coupon three and has reported quite poorly but keep in mind over the core the tenure treasury was up in the neighbors.
On a 100 ticks.
So meaningful underperformance, what should we just saw the previous table versus the hedge ratio since quarter end market is sold off slightly and they've given up some performance on the bottom left we show the same for coupons in the roll market typically.
Not so much with already but many of our peers. The roll market is used quite a bit it's really a source of cheap financing when rolls or special coupons can traded implied financing rates well through LIBOR that is not the case now call me because the speeds in each of these slides you see here the implied financing for these coupons is at best.
What a repo in most cases much further above it and.
And so that really that strategy is more or less off the table now is in terms of a cheap source of financing for owning mortgages as you would expect with it before port formative PBH on the right hand side specified pools of them very well pay ups for any form of call protection.
It's very robust or not so robust and fleeting those pay ups have gone very very well and we'll probably continue to do so.
Finally on slide 12 with respect to mortgages. This is a one year look back we're looking at TB a lot more or less is and as you can see were at or near the very.
Hi into that range and this is really just one way of looking at mortgages. If you look at for instance, the spread of the current coupon mortgage.
To a blend of five or 10 year treasuries or tenure treasury.
The current coupon even the one or two price mortgage are at multiyear why it's actually the widest levels. We've seen since early 2012 in the case of the current coupon mortgage so a mortgage is a very much cheapened out in this quarter.
Turning now to returns on slide 13 across sectors.
The top we show year to date returns and if Theres a theme here, it's just very much that risk assets have dominated.
The highest performing sectors investment grade corporates emerging market corporates high yield S&P 500 have done very well treasuries mortgage agency mortgages less so Q3 was slightly different much more of a.
Less of a risk on sentiment, while the best performing sectors investment grade corporates and emerging market corpus of still done well some of the other riskier assets like the S&P in emerging market or high yield of done poorly in fact really the star has been the investment grade corporate market. In fact, most recent data from.
TCC decline positioning data, which is a dollar denominated measure.
The.
Dollar amount long and as asset classes are at 95, 100% percentile ranking so mortgages, obviously, we're not in that same category.
I don't measure I guess the market for the quarter was the vol market on slide 14, you can see especially starting in early August vol has spiked to the since come off some but all measures evolve were elevated very much so in the quarter.
Slide 15, Oh, we talk about the written the short term rates market really I think at this point, it's been opportune time to talk about what has happened in the funding markets versus just live or in one month fed funds. This all started on September 16. This is obviously very meaningful development for us as a mortgage investors and lever.
Third basis.
As we all know back in 2017, the fed began to reduce their bloated balance sheet.
Taking it down to what they would deem to be more appropriate level, nobody really knows exactly what that was but I think on around September 16th we found out when in fact, we had a shortage of.
Liquidity in the market.
And we saw overnight funding rates spike on a case of sulfur and and repo, 7% overnight repo rates were not uncommon and really this reflects not so much on willingness to land, which is what we saw during the financial crisis. This was just an inability to lend just there was a reserve scarcity.
It was an inability to get funding to end users and this is really a lot to a large extent just driven by.
Regulatory developments since the end of the financial crisis, so whether it's a.
Supplemental liquidity ratio or high quality liquid asset test whatever the case may be or indicates a year ended GCIB test.
There is really just not an ability to get enough liquidity in the appropriate hands and of course funding rates have been reasons result, the fed has responded well in this first started on September 16th the fed had a meeting that we they announced some measures at their meeting since then on several occasions, they've made announcements saw the chairman gave his speech at the in a.
He conference on the October Eightth outlined some steps they were considering those were more formally announced a few days later, even this week that's been more steps taken so while the fed has been reactive to what's going on.
I wouldn't characterize the response is extremely aggressive they're not appearing to take a step like they did during the financial crisis to get very much in front of this and so.
Going forward there is still some doubt in terms of just how effective they'll be I think I don't see this evolving into a crisis, but I think most market participants, which they were just a little more aggressive in that regard terms of what it means for us.
So it has been resulted in elevated funding levels. If you go back to the first half of the year before the fed it started their easing cycle fed funds was running around to 40 241 basis points and we were funding on a one month basis points about 20 to 25 basis points higher.
Since then now the fed is in place. So fed funds is somewhat of a moving target, but we're funding levels or 40, 42, maybe basis points above that for one month. So the spread has increased so while the fed has eased around 50 basis points, we've only been able to pick up about 30 and lower funding costs.
So going forward I would assume that that would stay more or less the same so in other words, if the fed where ease of third time in the total reduction were 75 basis points I think we would still kind of keep that same spread around 50 to 55. So we we still get some benefit but the net effect is we've effectively lost most of one.
Eases resolve these developments.
Slide 16, just shows you the evolution of the outlook for the fed the top right is the.
Kind of the nearing the end of the tightening cycle. The fed at that time still expected to raise rates up in the mid threes the market never really got much beyond additional two hikes.
And ultimately we of course, we know that Didnt occur now in September of 19 at this most recent meeting.
Thats still seems rates tripping buck up slightly over to the market.
Strongly disagreed with that sentiment and has the fed easing at least one or two more times, although I would say with respect to the fed going forward, especially next week Theres still a fair amount of uncertainty.
I think most market participants are kind of expecting what you would call hawkish ease in other words, the that will likely ease but they may.
Provide guidance that implies that there are close to the art done for now and I think this is all driven by some a lack of consensus within the fed.
Theres two schools of thought one kind of focus is separately on the domestic economy the level of inflation.
Unemployment rate and so forth GDP growth, which are still strong and the other half is a little more global with global outlook and looking at a potential market stress in growth abroad, and other factors, which could ultimately affect the domestic economy. So the outcome of that kind of remains to be seen.
So to summarize all this I would say that it was it was very much a tough quarter for mortgage investors, especially if you are levered and dynamically hedged.
As a result of our results for this quarter our year to date return is only one of the half percent.
However, I think the opposite side of that coin is that I think we are.
An attractive point in terms of mortgage valuations I think most people view this asset classes at the extreme ships there may be some room for additional cheapening and the mortgage space is cheap for good reasons, we've had speeds at very high levels to be a performance is poor supply of mortgages is three to 5 billion a.
Hey for those multi sector asset managers out there chasing duration mortgages are not a good place to find it and the sectors Autoform and non plus we have some repo issues.
But as I said I think there's a growing sense that were at or near the bottom and that we're about to turn in the quarter I think that speeds the bar for speeds to get meaningfully higher is quite high.
We've been at low rates record low rates essentially for quite a period of time you have the seasonal affect ahead of us the burn out.
And and I think that while it's not necessarily easy the tide when exactly it's going to turn I think the outlook going forward is very asymmetric in favor of the asset class.
Coupled with some of the other points I made about.
Sister asset classes, which have done extremely well.
As a result, we feel very comfortable owning mortgages in this environment.
Result of the book value decline, our leverage ratio creeped up a little higher than it had been but we're comfortable keeping it there. So we've chosen not to reduce the balance sheet and intend to keep it at this type of a leverage ratio for these reasons.
At this point I'd like to dividends start talking about our results for the quarter.
Slide 18.
Ill start with the right side. This is the return by sector.
Starting first with pass throughs, we generated return in this.
The pass through portfolio of 3.28%.
Speeds, where the big driver here of speeds and pass through space were 15% plus for the quarter as a result amortization.
Premium amortization was high of course, the asset class performed poorly.
With respect to be structured securities in particular iOS.
With the market rallying and speeds very very fast the sector did very poorly.
You could argue that at some point around Labor day Io class is kind of at a point of maximum pain, we actually got to a point, where they was arguably positively convex in that sense that it really couldn't get any cheaper to extend the speeds increased people just view them as such Ext extreme though sheet Miss that they were desirable.
Bye.
From us as a hedging instrument, we view them as attractive now because they offer very good extension potential which is what we look and then when we use them as a hedge.
Turning now to the left hand side.
This is our proxy for core income that most of our peers use.
We do not present cord and saying since that they do we just basically take what you see here, which is if you look to the last call and that's effectively our income statement and we just parse out the realized and unrealized gains and losses from everything else, which would be interest income and expense in our total gionee expenses.
That number was 18 cents dividend was 24 somewhat light, but again, it's due to extremely high levels of speeds and premium amortization and is I'll say in a few months. We don't see this is persisting I think we're kind of it at trough I think the gross is probably behind us.
If you turn to slide 19.
This is kind of the same thing and words are in picture.
Several lines here the Blue line at the top is just the yield on the assets.
Red line is our economic funding costs in Green line is our NIM.
We've been in the low 2% for a while most two recent quarters drifted below that reflecting the higher level of speeds in excess of premium amortization as I said I think worst of that is behind us and I would expect us to recover.
Slide 20, just basically the same picture on here, we're showing our proxy for core the same exact off a conclusion to be drawn from that as in previous page.
21, we get into our portfolio activity I want to start on the right hand side as I mentioned, we did do a capital raise a follow on offering at the end of July .
When a focus here on the on the right hand side. The two lines Securities purchased and sold as you can see all the activity was in the past from side. So all the marginal capital.
As deployed in the past few portfolio, we did not buy in the Io Securities and in fact, if you look at the IPO interest only call them you can see that a combination of return on investment in mark to market losses reduced the allocation of that space. As a result, when you look to the left hand side, you can see that the pass through allocation.
Capital allocation increased from 66% to 75%, reflecting the combination of the fact that marginal capital was invested exclusively in pass throughs and the runoff of the Io portfolio.
Now turning to slide 23.
This is the outline of the portfolio.
Versus.
Snapshot, where the portfolio was at the end of the quarter.
With respect to arms in 15 years, there was no 20 years no meaningful changes.
We did do a few changes in the third year space.
We shifted some 30 year three exposure into three and a half's.
Wasn't so much of a duration caused relative value trade and we added two fours and foreign house again, there was marginal capital we deployed is resolved the capital raise.
This is mostly relative value trading in attempts to.
Increased the call protection of the portfolio as I see you can see the allocation to iOS is 2.07% Ventas reflects the run off.
When we did do the capital raise in July we have put in place some swaps as you see our swap position increased this quarter and we also put on some five year Treasury futures, which I'll say another order to about a moment, we no longer have any PVA hedges a since quarter end, we've done a few more trades again trying to add.
That call protection to the portfolio.
Some of the addition, wister subtraction by just parting ways with some higher paying lower yielding assets. So we think going forward the portfolio.
As position do better in this low rate high speed environment.
As I mentioned, our leverage ratio slide 25 at the high end of our recent range poaching 10.
And then finally on slide 26, just few words about our hedge positions.
As I mentioned the swaps, we put in place some new swaps, we did the capital raise.
Most of the capital raise was through that follow on offering we did run our ATM program in July .
But the incremental capital through that capital raise we put in place of $410 million notional swap at about 1.77% of the notional amount of that swap.
Essentially reflected all the marginal borrowing so in effect, we have locked in the funding cost of the marginal borrowing and in doing so more or less locked in the NIM on the marginal capital at about 125 to 30 basis points. So it is an accretive capital raise and not affected by the term on the repo market.
We did lock in the funding and we also added some fed funds futures positions as you can see the top right.
We chose fed funds futures because at the time these.
Had them most amount of fed eases, reflecting in the up futures market as you can see the blended rate there is 1.49%.
And the contracts themselves reflect about 50 basis points additional easing. So we'll see what the fed does they may be done. After next week. They may not that we've locked in a fair amount of funding.
Finally, a few words on the the cap rates. We did this at the end of July in anticipation of a fed easing cycle didn't really see what was going to happen starting in August .
With the turmoil in the market, but Fortunately, we were able to deploy the proceeds very quickly two or three days and as I said through the swap position we entered into.
We were able to lock in a NIM that was modestly accretive to earnings.
So weve, even though the timing wasn't quite as fortuitous, if we help because we're able to deploy the proceeds and lock in the funding quickly it wasnt accretive capital raise.
That's basically it operator for my prepared remarks at this point, we can turn the call over to questions.
Absolutely, Sir ladies and gentlemen, if you have a question at this time. Please press Star then one another one on you touched on top of selling what was your question. It's been answered you wish Jim yourself from the Q. Please press <unk>. Please press the pound.
Your first question comes from the line of Christopher Nolan from Ladenburg. Your line is.
Hey, guys.
Hey, Chris.
Yes.
Hey.
The on page 10, you show their hedge updates and new showing at the four and a half are outperforming could you explain that a little business on a surprising.
Oh, well I think it's large extend it was the desirability I'll give my answer and I'll, let hunter speak I think it was the less of evils.
Three and a half to enforce during this quarter P.A. very very poorly.
All they were basically shunned enforcing that this is versus a hedge ratio and four and a half's and been very low hedge ratio versus the tenure and it was more of just the.
Would you want to call. It a all people ran from the other coupons to these threes did poorly simply because they went from being the convexity play.
When they were at a discount.
To a premium and did poorly so it was really just the lesser of evils on 100, you want to add to that yeah I would just.
I think in particular, we use.
The hedge ratios that we use for that slide or from a firm who.
Modeled for perhaps being very very short so I don't remember off the top my head what that was the beginning of the period, but I want to say somewhere around like.
12% to 15% of a have a 10 year. So you had the.
Toward a half going up and price.
Five or seven tips.
Yes.
On a next pacing was 20 727 ticks versus the 10 year going up.
100, so it seems consistent with that math for use in like a 15% adventure and that would just add when you get into periods. Like this you can see a large disparity in hedge ratios people use.
In fact as a matter is a lot of times empirical duration shrink very very low so it mortgages, just don't behaved well in a sharp rally or sell off generally a that in this case. It was a very meaningful rally and there was a psychological significance to in late August early September we were getting very close to the all time low.
All in tenure yields.
And.
When people are chasing duration, they're not looking to mortgages and therefore, you know that thats why they can typically, especially the lower coupons do so poorly.
I think the higher coupon religious benefited from the math is hundred alluded to just the fact that the hedge ratio was so low.
Great and.
And then on page 23, I'm looking at your.
Interest rate sensitivity in the low right hand corner.
Yes, which has changed dramatically from the last quarter.
Is it fair to characterize that you guys are.
Basically not.
Not.
Not baking in any possible, but any possibility of a rate increase.
On your hedge position here.
Looking at.
Yeah, we definitely try that duration to the portfolio.
You know, we think that the bar for rate increases is or at least dramatic ones is a fairly low right. Now so we're trying to flatten it out as much as we can.
You know.
Delta hedging the portfolio to a certain extent, so while the times or we get to the upper end of the range, we'll try to add a little more duration. It was quite frankly very hard to come by last quarter.
There was.
Mortgages widening on a on a spread basis, and then volatility increasing so.
Even if you.
So we are wider in term and only as terms that we were also lower dollar price because volatility was increasing you had to speed dynamic at play which was more of an income event for us, but then also a.
Also the funding squeezed so that coming in at quarter end, certainly didn't help didnt to.
I hope our marks out so.
We're at the higher into the range I think we feel comfortable trying to flatten that portfolio out we tend to perform a little better than modeled in that down a shock scenario.
That's just because.
On a model some of the higher coupon.
Assets and some of our more seasoned iOS perform empirically have performed better than than models and those down scenarios. So I would think that were actually a little bit flatter than what has suggested here.
So anyway I think the goal is to yes to have less exposure to.
Sharp moves downward and rate and willing to take on.
A little more of a flat profile and to a rising rate environment. It also would add Chris and I tried to make the point earlier was that.
The volatility in the market was really extreme you know when you win.
All started right after the fed ease on the 31st and then following data was it.
Tweet by President Trump the Basi escalated the trade with China and August was very chaotic, it's very sharp rally and by the end of the month mortgage is pretty much lost all or duration and when you try to maintain a relatively flat profile youve got to find a way to do so and then we had this.
Sharp reversal in early September we sold off funny was 44 basis points on tens and like eight days.
And then on Saturday whatever September 14th we find out that.
We've attacked oil fields in Saudi Arabia in the market turns right around and rallies again, and so when you're trying to adjust your hedges with rates whipsawing that fast it gets very challenging.
That was really a lot of the reason for the.
The pain in the quarter.
And then going forward you know when when you get these extreme low levels of rates.
What you're seeing initial cable on the bottom right is the market. The models basically telling you that if you have a meaningful rally from here 50 basis points mortgages are going to underperform.
And.
Sell off of the way we're position, we would probably do better in a sell off I mean, obviously, if not a large positive number but.
But again I think that we're at a point where at least from a speed perspective.
I think it's just very asymmetric going forward, you could see speeds going a little faster.
But I think the bars pretty high I think in all likelihood they may be a slow trend lower but they really Kent I find it hardly that you get meaningfully fashion from here, we've taken steps in October also too.
Flatten that out even more on the down rate scenario, so which sold some of the really short.
Low yielding.
Assets and we've added some.
Quality call protection.
Exhibits.
Our direction.
So is it fair to say that given all that.
It sounds like you guys are service and sort of reflect Bob's comments.
Speeds to start slowing down a little bit maybe some of this volatility settling down.
And that's the reason for.
Going out for the four and a half 30 years, which is a change in strategy from the last couple of quarters.
Yeah, we would definitely adding that duration and threes and three and a half's.
Ill.
In a lot this is just relative value.
Two things relative value in defense that the longest duration mortgages got extremely rich because everybody is trying to add that duration.
And two and this is kind of a nuance, but when we talk about the performance of the TV a over the last year and a half Lehman was I didn't speak at all about of today, but part of the reason is will be seen in these very high gross whack pull so in other words historically when I went out bought up 3.5% mortgage the gross whack was around four give or take so normally.
The spread was like 50 Bips now it's 80 to 110. So you know Fannie threes have a 4% gross whack today pre pay like a three and a half so it's like you've shifted the S curve, so to speak and and know that but they tend to have higher average loan balances and very high FICO scores and so TV a page.
Is it extremely fast speed some of the the.
Major pulls that were produced even this year.
There's a one Paul I think it's a for that it paid 55 CPR. The first month, and 58, and 59 or something like that they've been terrible, but what we did finally find recently where solved.
Originator bid list, where the gross whack was 340 on a three year threeninety on a three and a half those are very attractive. So that's to some extent, which attracted us to those it wasn't an explicit desire to add that coupon it was where we could find value.
And that's that really like I said that was more relative value trading driven versus duration chasing driven that makes sense, yes, great. Thanks for taking my questions guys.
Thank you.
Again, if you wish to ask the question. Please press the topline on your attached telling telesales.
There are no further questions at this time please continue sir.
Thank you operator, and thank everyone for taking the time to listen in order to Accenture listening in on the replay.
If you do have questions that come up come to mind. After the fact, please feel free to call us in the office. Our number here is 772 to 311.00 will be very willing to take any questions. Otherwise we look forward to talk into next time. Thank you.
Ladies and gentlemen, this concludes today's conference. Thank you for participation.
Have a wonderful day, you may all difficult.